1. A company spent $1,000 last week repairing a machine. This week, the company is trying to decide if the machine can be better utilized if they assigned it a proposed project. To support the project, $9,000 of parts inventory is needed. A loan of $5,000 is planned to finance the project. What is the initial cost of the investment?
A$9000 B$10,000 C$14,000 D$15,000
2. A company is evaluating a project that will increase annual sales by $100,000 and annual costs by $80,000. The annual depreciation is $10,000. The applicable tax rate is 30%. What is the operationg cash flow for this project?
A$13,000 B$15,000 C$17,000
3. A company is evaluating a 5-year project that will increase annual sales by $10,000 and annual cost by 80,000. The project needs a MACRS 3 years equipment at a cost of $60,000. The applicable tax rate is 30%. What are the depreciation tax shield for the project in year 3 and year 5 respectively?
A$5,999 ; $2,666 B$2,666 ; $1,334 C$2,666 ; $0
4. A company is evaluating a 5-year project that will increase annual sales by $10,000 and annual cost by 80,000. The project needs a MACRS 3 years equipment at a cost of $60,000. The applicable tax rate is 30%. What are the OCF for the project in year 4 and year 5 respectively?
A$1,999 ; $15,334 B$15,334 ; $14,000 C$15,334; $0
5. A 5-year project needs an equipment at a cost of $60,000. The applicable tax rate is 30% and the 3-year MACRS is used. What is the after-tax salvage if the equipment can be sold at $20,000 at the end of the project.
A$20,000 B$14,000 C$15,333
6. City Security is considering a project with an initial fixed asset cost of $3.5 million which will be depreciated on the MACRS 3-year class over the 2-year of the project. At the end of the project, the equipment will be sold for an estimated $800,000. The project will increase sales 1.5 millions and reduce operating costs by 0.5 million a year. The tax rate is 35%. Initial investment of NWC at$100,000 is needed. Should this project be impletemented if the firm requires a 16% rate of return?